During 2020, you were hired as the Chief Financial Officer for MC Travel Inc., a fairly young travel company that is growing quickly. A key accounting staff member has prepared the financial statements, but there are a couple of transactions that have not been recorded yet because she is waiting for your guidance regarding how these transactions should be recorded. In addition, the staff member is not confident in preparing cash flow statements, so you have been asked to write statement for the 2020 year. MC Travel INC. reports under ASPE.

2) During 2020, the president, who is also the principal shareholder in the business, transferred ownership of a vacant piece of land in the Carribbean to the company. A hotel will be constructed on this property beginning in 2021. The cost when the president purchased this property was $10 million and the fair market value, based on the professional appraisal, at the time it was transferred to the company was $25 million. The president was issued 50,000 common shares in exchange for this land. This transaction has not yet been booked. Additional information that you have gathered to assist in preparing the cash flow statement is as follows:

1) In 2020, equipment was purchased for $250,000 . In addition, some equipment was disposed of during the year.

2) Investment income includes a dividend of $150,000 received on the temporary investment. Interest income of $106,000 was reinvested in temporary investments.

MC TRAVEL INC. Balance Sheet December 31, Note: The statements before any adjustments. 2020

ASSETS-Current assets Cash 7,600,000 Temporary investments 2,006,000 Accounts receivable 5,000,000 Allowance for doubtful accounts -200,000 Total current assets 14,406,000 Capital assets Land 250,000 Building and equipment 55,270,000 Accumulated depreciation -7,425,000 Total capital assets 48,095,000 Total assets 62,501,000

LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable 3,800,800 Interest payable 30,000 Income taxes payable 350,000 Dividents payable 0 Total current liabilities 4,180,800

Long term liabilities Long term bank loan 1,145,000 Bond payable 5% Miami property due 2019 40,000,000 Future income tax liability 175,000 Total long term liabilities 41,320,000 Total liabilities 45,500,800

Shareholders' equity Common shares 1,000,000 Retained earnings 16,000,200 Total shareholders' equity 17,000,200 Total liabilities and shareholders' equity 62,501,000 Difference : Assets - (Liabilities + Shareholders' equity) 0

MC TRAVEL INC. Income Statement For The Year Ended December 31, 2020,$ Sales 37,500,000 Expenses: Salaries and wages 5,000,000 Purchases from tour operators 22,500,000 Depreciation expense 2,500,000 Office, general, and selling expenses 3,489,800 Bad debt expenses 150,000 Interest on long-term debt 30,000 Bond interest expense 2,000,000 Total expenses 35,669,800 Income before other income and expenses 1,830,200 Investment income 256,000 Gain on sale of equipment 73,000 Income before income taxes 2,159,200 Income tax expense 647,750 Net income 1,511,450 Difference : Debits - Credits